Yet again we are ahead of a FOMC meeting. Yet again people are paying close attention to what the fed might say. Also, yet again, traders are obliterating TLT premiums ahead of the FOMC. This seems a little silly given that 10 and 20 day HV are near the bottom part of their current trading zone.
We have noticed that trader do not seem to love buying bond volatility. Considering how much TLT moved today, and has moved over the last few weeks (I mean look at those gaps and candles). How is it possible that that IV can be trading in line with 10 and 20 day HV. The options appear to be too inexpensive.
Over the last few weeks we have written blogs noting that IV was too low in Bonds, SPX, and FX. We left gold out, but it also could have been included in this list. The good news is that it means that markets are finally starting to recognize how much risk there is in the market place right now. Does this mean we are near a bottom? Probaby not, in SPX, but some names, most notably oil could be getting close. OIV, the VIX of Oil was over 75 today. If it gets into the 80's that would maret it at levels that equitiy markets saw in 2008.